2006/642/EC: Commission Decision of 8 March 2006 concerning the aid scheme that the Region of Veneto in Italy plans to introduce to improve processing and marketing conditions for agricultural products (notified under document number C(2006) 639)   (Text with EEA relevance)
Date: 2006-03-08
Institutions: European Commission
Subjects: State aid, Veneto, agricultural product, agro-industry, control of State aid, marketing, regional aid

27.9.2006

EN

Official Journal of the European Union

L 268/29

COMMISSION DECISION

of 8 March 2006

concerning the aid scheme that the Region of Veneto in Italy plans to introduce to improve
processing and marketing conditions for agricultural products

(notified under document number C(2006) 639)

(Only the Italian text is authentic)

(Text with EEA relevance)

(2006/642/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Commu-
nity, and in particular the first subparagraph of Article 88(2)
thereof,

Having called on interested parties to submit their comments
pursuant to the above provision (1),

Whereas:

I.

PROCEDURE

By letter dated 23 February 2000, registered as received on
28 February 2000, the Office of the Italian Permanent
Representative to the European Union notified to the
Commission, within the meaning of Article 88(3) of the
Treaty, Article 35 of Region of Veneto Law No 5/2000 (2)
(hereafter RL No 5/2000), which provides for aid for the
processing and marketing of agricultural products.

By letters dated 12 May 2000, registered as received on
18 May 2000, 1 August 2000, registered as received on
7 August 2000, 15 November 2000, registered as received
on 16 November 2000, and 24 January 2001, registered as
received on 30 January 2000, the Office of the Italian
Permanent Representative to the European Union provided
the Commission with the additional information requested
from the Italian authorities by letters dated 18 April 2000,
5 July 2000 and 21 September 2000 and at a bilateral
meeting held on 13 December 2000.

(5)

The Italian authorities submitted their comments by letters
dated 12 June and 22 June 2001. The Commission did not
receive any comments from other interested parties.

II.

DESCRIPTION

(6) Article 35 of RL No 5/2000 provides for state aid aimed at
improving the processing and marketing conditions for
agricultural products. The aid is targeted at projects carried
out by agrifood undertakings that applied for funding
under Council Regulation (EC) No 951/97 of 20 May 1997
on improving the processing and marketing conditions for
agricultural products (4) during the 1994-99 programming
period (5). Some of the undertakings actually went ahead
with the work, but failed to receive any public aid due to a
funding shortfall.

(7) According to Decision of

competent authorities

the Regional Government
No 4202 of 14 September 1993, during the above period,
the undertakings concerned could submit applications for
part-financing under the programme for such projects to
the
(Regional Government —
Department for Agriculture and Relations with the EEC)
before 30 April and before 30 September each year. On
completion of the project-selection procedure, the compe-
tent authorities drew up a ranking list of the projects
selected and informed the potential beneficiaries of their
‘eligibility for financing’ by publishing the Decision of the
Regional Government approving the ranking list in the
Official Journal of the Region of Veneto. Those under-
takings whose investment projects had not been selected
were sent a letter explaining why their application had been
rejected.

By letter dated 2 April 2001 the Commission notified Italy
of its Decision to initiate the procedure provided for in
Article 88(2) of the EC Treaty in respect of the aid in
question.

(8)

The Commission Decision initiating the procedure was
published in the Official Journal of the European Union (3).
The Commission invited interested parties to submit their
comments on the measure in question.

In the opinion of the Italian authorities, the publication of
the Decision approving the above ranking list amounted
(under the law on the publication of official acts (6) to
notification by the official authorities of the acceptance of
applications for
the projects concerned,
which, according to those authorities, created in the
undertakings on the ranking list a legitimate expectation
that aid would be granted.

financing for

(1) OJ C 140, 12.5.2001, p. 2.
(2) Veneto Regional Law No 5/2000 of 28.1.2000. General provisions
refinancing and amending regional laws for the preparation of the
yearly and multi-annual budget of the Region (2000 Financial Law).

(3) See footnote 1.

(4) OJ L 142, 2.6.1997, p. 22.
(5) The Veneto Regional Operational Programme was approved by

Commission Decision of 2 October 1996 (96/2598/EC).

(6) Law No 241 of 7.8.1990, Italian Official Journal (General Series)
lays down ‘New rules on administrative

No 192 of 18.8.1990,
procedures and on access to administrative documents’.

(1)

(2)

(3)

(4)

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(9) According to the Italian authorities,

the investments
concerned could be made following notification of the
eligibility of expenditure on the projects and, in any case,
after submission of applications for funding (7).

(10)

It was planned to compile ranking lists every six months
until all the funding provided for in the Veneto Regional
Operational Programme (Veneto ROP) had been used up.
By Decision of the Regional Government No 4102 of
23 November 1999 (8) the final ranking list of applications
submitted up until 14 July 1999 was published. The
resources were used up before all the projects on the
ranking list could be financed. A number of projects could
not be financed although they were on the published list of
projects eligible for financing.

(11) Faced with this situation, various sources of financing were
used (for example, resources from overbooking, agrimone-
tary funding and funding under Article 29 of Regional
Law No 88 of 31 October 1980 (9)), leaving 36 projects of
the 150 contained on the final ranking list as eligible for
financing still to be financed.

(12) Article 35 of RL No 5/2000 provided for the financing of
the 36 projects that had not received public financing
during the 1994-99 programming period but which did,
however, figure on the list of selected projects and on some
of which work had already started.

(13) The budget allocated for financing the aid was ITL 5 billion
(EUR 2 582 284), but the Italian authorities affirmed that if
other financial resources became available at a later date
they would allocate further
financing to those same
projects. The scheme would continue until the available
budget had been used up (as initially indicated or as
subsequently increased).

(14) The planned aid could not be combined with other aid

granted for the same purpose.

(15) The regional measure is an extraordinary measure and is of
limited duration. It concerns initiatives that, at the time they
were approved by means of their inclusion in the published
ranking list, complied with the sectoral
limits and the
requirements laid down in the Veneto ROP, approved by the
Commission, with Commission Decision 94/173/EC on the
selection criteria to be adopted for
for
improving the processing and marketing conditions for
agricultural and forestry products and repealing Deci-
sion 90/342/EEC (10) and with Regulation (EC) No 951/97,

investments

on the basis of which the regional authorities approved
applications for financing.

(16)

In addition, the Italian authorities stated that, although the
measure involved the 1994-99 programming period, the
compatibility of the projects concerned with the common
market had to be evaluated on the basis of the ‘Community
state aid in the agriculture sector’ (11)
guidelines
(hereafter referred to as ‘the guidelines’), since the state
aid scheme was notified after the entry into force of those
guidelines. In particular, the Italian authorities undertook to
comply with the conditions,
limits and provisions laid
down in point 4.2 of the guidelines, i.e:

for

(a)

the aid rate would not exceed 40 % of eligible
investments,

(b)

no aid would be granted to undertakings in financial
difficulty,

(c)

regarding the

to be eligible, undertakings had to comply with
environment,
minimum standards
hygiene and animal welfare, it being understood that
aid would be granted to allow undertakings to comply
with newly introduced minimum standards regarding
the environment, hygiene and animal welfare,

(d)

the regional authorities would verify that normal
market outlets for the undertaking's products can be
found, obtaining and verifying contracts for marketing
such products.

(17) As regards the requirements referred to in point 16(b), (c)
and (d),
they would
the Italian authorities stated that
comply with the Rural Development Plan for the Region of
Veneto for 2000-06 (Veneto RDP) (12). The aid was to be
provided in the form of a capital grant not exceeding 40 %
of the duly certified eligible expenditure in accordance with
the conditions, limits and provisions laid down in point 4.2
of the guidelines. Costs arising from the application of this
Article would be borne entirely by the region and
combination with other existing aid instruments or
schemes is prohibited.

(7) Under Article 11 of Regional Law No 1 of 8 January 1991 (notified
state aid No N100/91, approved by
to the Commission as
Commission Decision SG (91) D/7024),
implementation of
initiatives for which public financing of any form is requested must
begin after the application for financing has been submitted.
(8) Official Journal of the Region of Veneto No 112, 28.12.1999.
(9) The Law introduces aid for structures for improving the value of and
protecting agricultural and livestock products (aid approved by
means of Commission communication No 16065 of 17 October
1980).

(10) OJ L 79, 23.3.1994 p. 29.

(18) The Italian authorities stated that no aid would be granted
to projects
in contravention of any prohibitions or
restrictions laid down in the common organisations of
that concerned the manufacture and
the market or
marketing of products which imitated or substituted for
milk and milk products.

(11) OJ C 232, 12.8.2000, p. 19.
(12) Approved by Commission Decision C(2000) 2904 of 29 September

2000.

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THE ARGUMENTS PUT FORWARD BY THE
III.
COMMISSION WHEN INITIATING THE PROCEDURE

(19) The Commission initiated the procedure provided for in
Article 88(2) of the Treaty because it had doubts regarding
the compatibility with the common market of the new aid
scheme introduced by Article 35 of RL No 5/2000.

receipt of their applications for funding (15) nor the fact that
the regional authorities had always granted the expected
funding to projects that, after assessment, they had decided
to put on the ranking list of projects eligible for public
financing should have created in the undertakings on that
the
list a legitimate expectation of
financing planned for the 1994-99 programming period.

receiving any of

(20) The doubts were raised by the fact that the aid could be
granted to undertakings
that had already made the
investments planned under a project for which they had
submitted applications for financing for the 1994-99 pro-
gramming period, i.e. under a part-financed aid scheme.

the possibility that

(21) The Commission could therefore not rule out when it
initiated the procedure
the aid
constituted retroactive funding for activities already carried
out by the beneficiaries and therefore lacking the necessary
incentive element and that
it should consequently be
regarded as operating aid with the sole aim of relieving the
beneficiary of a financial burden.

(22) Under points 3.5 and 3.6 of the guidelines, in order to be
considered compatible with the common market, any aid
measure must contain some incentive element or require
some counterpart on the part of the beneficiary (13).

(23) The notified aid scheme therefore appeared to fall within
the scope of points 3.5 and 3.6 of the guidelines. On the
basis of the information available to it when it initiated the
procedure, the Commission took the view that the reasons
put forward by Italy were not sufficient to demonstrate the
existence, either under the aid scheme implemented during
the 1994-99 programming period nor under the notified
aid scheme, of a legal obligation towards the (potential)
beneficiaries that might have given rise to (or justified the
existence of) a legitimate expectation on their part and
therefore constitute a sufficient incentive for starting the
work.

(24) The Commission took the view that neither the Law on the
publication of official acts (14) nor the letters sent by the
regional authorities to those concerned to acknowledge

(13) See in particular

the following cases: C1/98 (ex N750/B/95)
concerning the state aid scheme implemented by Italy for the
production, processing and marketing of products listed in Annex I
to the EC Treaty (Sicilian Regional Law No 68 of 27 September
1995); C 36/98 concerning the aid scheme Italy plans to implement
for small and medium-sized enterprises operating in Objective 1
regions; C70/98 concerning the aid scheme notified by Italy (Marche
Region) concerning amendments
to the single programming
document
for 1994–99 for assistance from the Community
Structural Funds for Objective 5(b) areas.

(14) See footnote 6.

(25) The Commission takes

the

the view that

regional
authorities have no legal obligation as regards applications
for financing considered to be eligible and entered on the
ranking list published in the Official Journal of the Region
of Veneto during the 1994-99 period and consequently
there is no basis for a legitimate expectation by the
undertakings concerned. The absence of such an incentive
element is confirmed by the following: the undertakings
eligible for financing, when they did not receive the
financing concerned from the competent authorities, did
not take steps to enforce their rights, rights which the
regional authorities moreover consider
to be acquired
rights, on the basis in particular of Italian administrative
law. According to the Commission, no appeals were lodged
because, in the absence of a legal obligation on the part of
the regional authorities, the applicants probably did not
have any right to request payment of the aid.

(26) The Commission expressed doubts as to whether aid for
expenditure incurred before it was confirmed that projects
had been accepted could still be deemed to be aid to
facilitate the development of certain economic activities
within the meaning of Article 87(3)(c) of the Treaty. In
accordance with the Commission's constant practice, as
confirmed by the Court of Justice (16), aid to facilitate the
development of certain economic activities or certain
regions may be considered as such only if the Commission
can establish that the aid will contribute to the attainment
of one of the objectives specified, which under normal
market conditions the recipient undertakings would not
attain by their own actions. In the case in point, it is clear
that
the investments in
question without the aid.

the undertakings carried out

(27) Another factor that, in the opinion of the Commission,
raised doubts about the existence of an incentive element
was the drawing up of the ranking lists. Decision of the
Regional Government No 4202 of 1993 lays down that
applications must be submitted to the regional authorities
by 31 January and 30 September each year. The ranking list
of applications submitted is then drawn up and the

from the authorities of

(15) The Italian authorities simply supplied a copy of a letter (dated
1o April 1999)
the Region of Veneto
acknowledging the receipt by an office (responsible for structural
measures in the agrifood sector) of an application from a potential
beneficiary for the purposes of the usual technico-administrative
enquiry. This communication is compulsory under the law on the
publication of official acts (see footnote 6).

(16) See in particular the judgment of the European Court of Justice in
Case 730/79 Philip Morris v Commission [1980] ECR 2671.

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authorities must notify those applicants whose applications
have been rejected because they fail to fulfil the require-
ments laid down. If this was the way the mechanism was
intended to operate, it could be concluded that drawing up
a six-monthly ranking list would have enabled the regional
authorities accurately to calculate on a regular basis the
resources still available, which would have allowed them to
refrain from publishing new calls for applications and
receiving new applications that could not be accepted
because insufficient resources were available.

carried over from the previous, 1994-99 programming
period’. To that end, the regional authorities undertook to
notify cases not falling within the scope of the 20 % rule
referred to in Commission communication No 54/94/
D24823 (of 22 February 1994). The regional authorities
the possibility of
have provided no further details of
additional sources of financing and the relevant methods of
payment and such possibility would appear to contradict
the assertion that the notified measure is a one-off measure.

beneficiaries

(28) Further aspects that, in the opinion of the Commission,
raised doubts about the existence of an incentive element
are the budget provided for in Article 35 of the Law
concerned and the intensity and exact amount of the aid.
The budget of ITL 5 billion or EUR 2,5 million announced
by the regional authorities would be sufficient to finance
only a small part of the expenditure already incurred by the
ITL 70 billion or
(around
potential
therefore
EUR 35 million). The Commission cannot
understand why the Italian authorities stated that
‘the
capital grant will not exceed verified eligible expenditure’,
since, on the basis of the information available to the
Commission, the aid intensity would be less than 10 % (17).
The fact that the Italian authorities consider such a low rate
of aid as adequate to provide an incentive while a much
higher rate of aid was considered necessary for the same
type of project in the Regional Operational Programme for
1994-99 (18)
is a further indication of the lack of any
incentive to carry out the sort of projects for which aid was
being provided.

(29)

In addition, the most recent information received (regis-
tered as received on 30 January 2001) contradicted that
sent previously:

(a)

(b)

in particular, the ranking list contained 134 projects
considered to be eligible rather than 150; the Italian
authorities said that financing was still to be provided
for 36 of those projects;

in addition, there were discrepancies concerning the
investments carried out by the
exact amount of
given is
beneficiaries:
ITL
the
ITL 70 000 million notified previously.

the most

120 081

million

recent

rather

figure

than

(30) Another aspect to be clarified was the frequency with which
the aid is to be granted. The Italian authorities had initially
said that this was an extraordinary measure of
limited
duration (see point 15). This is in contradiction with other
statements made by those authorities (19) regarding the
the same
possibility of granting further financing for
projects. The initial notification stated that
‘if, when
additional verifications have been carried out on the
applications, further financing is required, this must be
no more than is strictly necessary to cover applications

(17) The ITL 5 billion available to the Region represents less than 10 % of
the total investments carried out by the beneficiaries (ITL 70 billion).
(18) Regulation (EC) No 951/97 authorises aid of up to 55 % for

investments outside Objective 1 regions.

(19) See point 9 of the letter initiating the procedure.

sector. This

(31) Finally, the Italian authorities stated that projects for which
aid applications had been submitted and accepted during
the 1994-99 programming period but on which work had
not already started would be financed under the new Rural
Development Plan for the Veneto Region for 2000-06, after
their compliance had been checked in the light of the new
Community rules
is,
in the agricultural
however, difficult to reconcile with the data provided on
the final general ranking list
(i.e. on the applications
accepted for financing), submitted with the most recent
additional information (registered as received on 30 January
2001). Of the total of 134 projects accepted, 20 had been
financed using agrimonetary aid, 10 using aid originating
from overbooking, 54 under Regional Law No 88/80,
4 under Decree Law No 173/98 and 10 had been cancelled.
On that basis, only 36 projects remain to be financed: even
the new Rural
if
Development Plan for 2000-06, it is not clear to which
‘applications carried over from the previous […] program-
ming period’ the Italian authorities are referring to.

financing could be granted under

(32) The Commission reserved the right to examine the question
of the use of agrimonetary aid and aid originating from
overbooking: the use of such sources of financing could be
construed as misuse of decisions to authorise aid or might
even not have been notified to the Commission.

IV.

COMMENTS SUBMITTED BY ITALY AND OTHER

INTERESTED PARTIES

(33) By letter dated 22 June 2001, Italy sent the Commission its
comments on the aid scheme in response to the Decision to
initiate the procedure provided for in Article 88(2) of the
Treaty. The Commission did not receive any comments
from other interested parties.

(34)

In their reply, the Italian authorities first of all detailed the
administrative procedure for granting aid during the 1994-
99 programming period, in order to demonstrate that that
procedure created a legal obligation towards potential
beneficiaries that might have given rise to (or justified the
existence of) a legitimate expectation on their part and
therefore constitute a sufficient incentive for starting the
work before receiving the aid. In the description of the
scheme submitted before the procedure was initiated, the
Italian authorities stated that once they had been placed on
the single ranking list of undertakings eligible for aid for the

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agrifood sector, undertakings remained on that list until
financing from the Region was available. As the necessary
resources became available (either from the regional budget,
under Article 29 of Regional Law No 88/1980, or under
the Veneto ROP under Council Regulation (EC) No 866/90
on improving the processing and marketing conditions for
agricultural products (20) and Regulation (EC) No 951/97 or
from the national budget (overbooking and agrimonetary
aid)), the regional authorities took an ad hoc administrative
decision selecting the undertakings to receive financing
from the single ranking list, according to criterion of
preference and priority, and in particular those under-
takings whose applications would ensure that the resources
available would be fully used.

(39) The Italian authorities take the view that both point 3.6 of
the guidelines (21) and the way the Commission has applied
it (22) created in the mind of applicants, from the time they
submitted their application to the competent authorities, a
legitimate expectation that they would receive financing.
Regional Government Decision No 4202/93 laying down
the procedure for submitting applications and for drawing
up ranking lists and confirming the provisions of Regional
Law 1/1991 (23) assured potential beneficiaries of
the
eligibility for public financing of investments commenced
after an application had been submitted but before a
decision had been taken to grant aid.
In addition, the
legitimate expectation that arose when the application was
submitted was reinforced when the applicant was entered
on the list of undertakings eligible for financing.

the appropriate

(35) The Region therefore had a pool of projects that could be
time when
quickly implemented at
authorities
available. The
financing became
consider that drawing up a ranking list of eligible projects,
even though financing is not
immediately available,
providing for actual financing at a future date, does not
infringe any Community rule.

regional

(36) According to the regional authorities, Article 35 of RL
No 5/2000 will be applied to the 36 projects/undertakings
remaining on the ranking list. These remaining projects/
undertakings have been re-examined and the procedure has
been opened to file two of them that do not comply with
the guidelines. The competent authorities also say that
15 undertakings have submitted applications under the
Rural Development Plan for the Region of Veneto for
2000-06 (Measure 7 — Improving processing and market-
ing conditions for agricultural products) and therefore, with
the prospect of financing being granted for the new 2000-
06 programming period, have withdrawn their previous
applications. The regional authorities do not rule out other
undertakings withdrawing their projects because,
for
various reasons, they are no longer interested in carrying
them out. The number of potential beneficiaries of the aid
has therefore been drastically reduced compared with the
initial list.

(37) The Italian authorities take the view that

the opinion
expressed by the Commission in its letter initiating the
procedure provided for in Article 88(2) of the Treaty has no
legal basis and contradicts the Commission's usual practice.

(38) The Commission initiated the procedure regarding the aid
because it could be granted to undertakings remaining on
the list that had begun to make or had already made the
investments concerned after submitting their aid applica-
tion for the 1994-99 programming period. The Commis-
sion considers that, in the absence of a legal obligation on
the regional authorities towards potential
the part of
beneficiaries, aid granted retrospectively does not provide
the necessary incentive element and therefore constitutes
operating aid that
is incompatible with the common
market.

(20) OJ L 91, 6.4.1990, p. 1.

(40) Furthermore, the potential beneficiaries of aid, knowing
that they had submitted their applications correctly and
that they fulfilled the legal requirements, could reasonably
expect their applications to be accepted, which was then
confirmed with their entry on the ranking list, although
they had still to await the decision granting aid.

(41) The Italian authorities also point out that it is Commission
practice to accept the extension of aid schemes that have
already been approved in order to permit them to achieve
their objectives (24), which is basically what
the Italian
authorities are requesting for
the aid scheme to be
implemented under Article 35 of RL No 5/2000. In other
words, according to the Italian authorities, the aid would be
compatible with the Treaty if it had been granted not later
than 1999,
i.e. during the period of application of the
scheme or schemes for which the applications for financing
had been submitted.

(42) The Italian authorities explain that, under Italian adminis-
trative law, it is possible to contest in an administrative
court acts of the public authorities which infringe either
individual rights or legitimate interests. Legitimate interests
are defined as the interest of private individuals in the
correct use of power by the public authorities, as regards
both expectations concerning the extension of their legal
sphere (interessi pretensivi — interests involving a claim on

(21) Point 3.6 of the guidelines lays down that ‘aid which is granted
retrospectively in respect of activities which have already been
undertaken by the beneficiary cannot be considered to contain the
necessary incentive element, and must be considered to constitute
operating aid which is simply intended to relieve the beneficiary of a
financial burden. Except in the case of aid schemes which are
compensatory in nature, all aid schemes should therefore provide
that no aid may be granted in respect of work begun or activities
undertaken before an application for aid has been properly
submitted to the competent authority concerned.’

(22) Decisions of 28 November 2000, SG(2000) D/108799 (Aid N 226/
2000), 13 March 2001, SG(2001) D 286857 (Aid N 729/a/2000),
28 February 2001 SG(2001) D/286508 and 4 August 2000,
SG(2000) D/105958.

(23) Article 11 of the Law lays down that ‘initiatives forming part of a
business plan … may be implemented before the decision to grant
aid is adopted provided that they are begun after submission of the
aid application…’.

(24) Aid N 63/2001 and aid N 24/2001.

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Official Journal of the European Union

27.9.2006

correct

application of

the
the authorities) and the
procedural obligations imposed on them (interessi procedi-
mentali — procedural interests), in particular under the law
on the publication of official acts. In accordance with the
the Italian Court of Cassation (25), private
case law of
individuals may take action under administrative law not
only to obtain the annulment of an act by a public
authority that infringes their legitimate interests or their
subjective rights, but also to obtain the adoption of an
expected act and compensation for losses caused by the
adoption or by the failure to adopt an act.

(43)

the legitimate interest of

In the case in question,
the
applicants (for public financing) remaining on the list is an
interest involving a claim on the authorities, since the
applicants legitimately expected their rights to be extended
by the decision granting aid.

(44) On the basis of that case law of the Court of Cassation, the
Italian authorities do not rule out that, if an action were
brought, an administrative court might decide to order the
regional authorities to pay compensation.

(45) The Italian authorities state that none of the undertakings
eligible for financing remaining on the list has brought an
administrative action in the reasonable expectation of being
granted aid. To bring action against the Region of Veneto,
the undertakings concerned would have to demonstrate an
interest in so doing because of an act that causes them an
actual loss. The Italian authorities define that act as a failure
to grant financing and the cancellation of the ranking list:
an action could legitimately be brought only against a
decision to cancel the aid or to repeal Decision 4102/99,
since this would damage their
legitimate and actual
aspiration to obtain the aid concerned.

(46) As regards the Commission's reservations concerning the
use of agrimonetary aid and aid originating from over-
booking referred to in point 31 of the letter initiating the
procedure, the Italian authorities state that:

the aid scheme relating to initiatives in the agrifood
sector, which is covered by Regulation (EC) No 951/97
and which used funding resulting from the revaluation
the Italian lira in accordance with Council
of
Regulation (EC) No 724/97 (26),
falls within the
programme of measures for Italy approved by the
Commission by note No 5372 of 2 July 1998;

(a)

(b)

the Commission in Decision C(96) 2598 of 2 October
1996.

the letter

(47) The Italian authorities do not agree with the method used
for calculating the aid and the argument put forward by the
Commission in point 27 of
initiating the
procedure. They state that
the sum made available
(ITL 5 billion, or around EUR 2,5 million) is to be used
so as to ensure a significant contribution, i.e. 30 % of the
investments eligible for aid, which total ITL 15 billion, or
around EUR 7,5 million. This total for eligible investments
is purely hypothetical, since a technical re-evaluation of
projects has to be carried out, as have a new analysis of
projects, a new verification of the eligibility of applicants, a
new calculation of the investment volume, etc. The re-
examination will be carried out when there are definite
prospects for
to cause potential
beneficiaries any further problems.

financing so as not

(48) As regards the financing of investments remaining on the
ranking list from funds made available under the RDP for
the Region of Veneto for 2000-06 (15 undertakings
remaining on the list have submitted applications under
the RDP, see point 32), the competent authorities have
affirmed that they will be eligible for financing provided
that they meet all the requirements of that RDP, including
the requirement that work for which financing is requested
must not have been started.

V.

ASSESSMENT OF THE AID

(49)

In accordance with Article 87(1) of the EC Treaty, any aid
granted by a Member State or using state resources in any
form whatsoever which distorts or threatens to distort
competition by favouring certain undertakings or
the
production of certain goods is, in so far as it affects trade
between Member States, incompatible with the common
market. The measures covered by the Decision in question
correspond to this definition for the following reasons.

(50) The measures in question,

financed by the Region of
Veneto, favour certain undertakings and certain operators
(undertakings processing and marketing agricultural prod-
ucts) and may affect trade, since Italy accounts for 14,07 %
of European agricultural production (27).

(51) However, in cases covered by Article 87(2) and (3) of the
Treaty, some measures may enjoy derogations and be
considered compatible with the common market.

the overbooking amounts originate from financing
additional to that already granted by the rotating fund
for implementing Community policies for the Veneto
ROP covered by Regulation (EC) No 951/97,
the
Veneto ROP constituting a legal basis, as approved by

(52) Given the nature of the measures described above, the only
possible derogation is laid down in Article 87(3)(c) of the
Treaty, according to which aid may be
considered
compatible with the common market if it is to facilitate
the development of certain economic activities or of certain

(25) Joined Chambers of the Court of Cassation 500/1999.
(26) OJ L 108, 25.4.1997, p. 9.

(27) Most recent data available from Eurostat, which are from 2003 and

therefore refer to the EU-15.

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L 268/35

economic areas, where such aid does not adversely affect
trading conditions to an extent contrary to the common
interest.

(53) To benefit from the derogation provided for in Article 87(3)
(c) of the Treaty, aid for investments for the processing and
marketing of agricultural products must comply with the
relevant provisions of Commission Regulation (EC) No 1/
2004 of 23 December 2003 on the application of
Articles 87 and 88 of the EC Treaty to state aid to small
and medium-sized enterprises active in the production,
processing and marketing of agricultural products (28).
Where that Regulation does not apply, or
the
requirements laid down are not met, the aid must be
appraised in the light of the relevant provisions of the
Community guidelines for state aid in the agriculture sector.

if all

(54) Since the scheme in question is not limited to small and
medium-sized undertakings, Regulation (EC) No 1/2004
does not apply. Therefore, the appraisal of the compatibility
of the aid must be based on the guidelines, and more
particularly points 3.5, 3.6 and 4.2 thereof.

(55)

In accordance with points 3.5 and 3.6 of the guidelines, the
Commission takes the view that, in order to be considered
compatible with the common market, any aid measure
must contain some incentive element or require some
counterpart on the part of the beneficiary and that aid
granted for work already undertaken by the beneficiary
does not contain the necessary incentive element and must
therefore be considered to be operating aid. Except in the
case of aid schemes which are compensatory in nature, all
aid schemes should therefore provide that no aid may be
granted in respect of work begun or activities undertaken
before an application for aid has been properly submitted to
the competent authority concerned.

(56) The aid scheme that Article 35 of RL No 5/2000 intends to
introduce provides exclusively for the financing of projects
implemented by agrifood undertakings that had submitted
applications for aid under a part-financed aid scheme
during the 1994-99 programming period and had been
declared eligible for financing by being entered on the list
drawn up by the regional authorities, but had failed to
receive any financing due to a funding shortfall (hereafter
referred to as projects remaining on the list). Investments
for some of the projects remaining on the list were begun
after the applications for financing were submitted for the
1994-99 programming period.

(b)

(c)

(d)

(e)

to holdings that comply with minimum standards
regarding the environment, hygiene and animal
welfare;

the aid rate does not exceed 50 % of eligible
if
investments in Objective 1 regions and 40 % in the
other regions;

if the eligible expenditure is for the construction,
acquisition or improvement of immovable property,
new machinery and equipment and general costs up
to 12 % of that expenditure;

if there is sufficient proof that normal market outlets
for the products concerned can be found. In granting
the aid, the Italian authorities must take account of
any restrictions on production or
limitations of
the common market
Community support under
organisations. In particular, no aid may be granted
in contravention of any prohibitions or restrictions
laid down in the common market organisations and
no aid may be granted which concerns the manu-
facture and marketing of products which imitate or
substitute for milk and milk products.

(58) As an exceptional measure, aid may be granted for
investment projects for which applications were submitted
during the programming period ending on 31 December
1999 and that were then considered to be eligible but
which were not processed because of a shortage of funds, it
being understood that that only those investment projects
begun after
to the
competent authority for financing may receive aid.

submission of applications

the

(59) After

examining the documentation concerning the
administrative procedures used by the competent author-
ities for granting aid during the 1994-99 programming
period and in accordance with the interpretation used at the
the Commission also considers the investments
time,
referred to in point 57 to be eligible (29). According to
that interpretation, under an aid scheme that is presented as
completing a previous scheme, aid granted for work already
begun by the beneficiary after submission of
the aid
application in response to the previous call for applications
has the necessary incentive element and cannot therefore be
considered to be operating aid, provided that the work was
begun or the activities undertaken after the aid application
was properly submitted to the competent authority and
that that authority had declared the project eligible for
financing.

(57) On the basis of the information gathered during the formal
investigation procedure, the Commission takes the view
that the notified scheme is compatible with the common
market, but to be eligible for the aid provided for under the
scheme, those projects remaining on the list must fulfil the
conditions laid down in point 4.2 of the guidelines. Aid
may therefore be granted only:

(60) The Commission would point out to the Italian authorities
that its current interpretation is to consider that aid granted
for activities undertaken after an application for aid has
been submitted to the competent authority but before that
application has been accepted by means of an act that
places a legal obligation on the public authorities towards
the (prospective) beneficiaries has no incentive effect (30).

(a)

to economically viable holdings;

(29) The Commission has previously so ruled with regard to Aid 715/

1999, letter SG(2000) D/105754 dated 2 August 2000.

(30) This is stipulated in Article 17 of Regulation (EC) No 1/2004, see

(28) OJ L 1, 1.1.2004, p. 1.

footnote 20.

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27.9.2006

(61) Regarding the use of agrimonetary aid and aid originating
from overbooking to finance projects remaining on the list
before 31 December 1999, the Italian authorities stated that
the use of funds released by the revaluation of the Italian
lira under Regulation (EC) No 724/97 for measures
provided for under the Veneto ROP referred to in the
Regulation had been approved by the Commission by
means of letter No 5372 dated 2 July 1998, while the
overbooking amounts originate from financing additional
to that
rotating fund for
implementing Community policies under the Veneto ROP.
The Commission therefore concludes there was no misuse
of decisions to authorise aid or failure to notify aid, since
the financing was granted for measures provided for by the
ROP then in force.

already granted by the

(62) As regards the one-off nature of the scheme, the authorities
responsible explained that this term was used to mean that
the scheme cannot be combined with other schemes, that it
is exclusively for undertakings remaining on the list and
that it cannot be used for other operations: once the list has
been exhausted, the scheme will no longer have any legal or
financial effects. The competent authorities stated that the
initial budget would be around EUR 2,5 million but that
this could be increased should this be insufficient to ensure
that public aid would constitute a significant contribution
to projects accepted for financing. The competent author-
ities undertook to notify the Commission of any increase of
more than 20 % of the original budget.

(63)

It is Commission practice to accept increases in the original
budget of existing schemes. This practice was confirmed by
Article 4(1) of Commission Regulation (EC) No 794/2004
implementing Council Regulation (EC) No 659/1999 laying
down detailed rules for the application of Article 93 of the
EC Treaty (31). The Commission takes the view that, under
that provision, an increase in the original budget of an
existing aid scheme by up to 20 % should not be considered
an alteration to existing aid and that where the national
authorities exceed that percentage, the alteration must be
notified in accordance with Article 4(2) of Regulation (EC)
No 794/2004. There is therefore nothing to prohibit the
Italian authorities from increasing the original budget of the

scheme under examination provided this
accordance with the rules.

is done in

VI.

CONCLUSIONS

(64)

In the light of the above, the Commission considers that the
aid provided for in Article 35 of RL No 5/2000 in favour of
undertakings involved in the processing and marketing of
agricultural products is in accordance with point 4.2 of the
Community guidelines for state aid in the agriculture sector.
The aid measure is therefore eligible for the derogation
provided for in Article 87(3)(c) of the Treaty,

HAS ADOPTED THIS DECISION:

Article 1

The aid that Italy intends to implement under Article 35 of
Region of Veneto Law No 5/2000 is compatible with the
common market, subject to fulfilment of the conditions laid
down in Article 2 of this Decision.

Article 2

The Italian authorities shall notify the Commission of any
increase of more than 20 % in the original budget of the aid
scheme provided for in Article 35 of Region of Veneto Law
No 5/2000.

Article 3

Within two months of notification of this Decision, Italy shall
inform the Commission of the measures it has taken to comply
with it.

This Decision is addressed to the Italian Republic.

Article 4

Done at Brussels, 8 March 2006.

For the Commission
Mariann FISCHER BOEL
Member of the Commission

(31) OJ L 140, 30.4.2004, p. 1.